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This study analyzes the problem of managing agricultural credit facilities (input loans) offered to
cotton out-growers at North Western Division (NWD) of the Ghana Cotton Company Limited
(GCCL), a company engaged in the production of seed cotton using the out-grower system, and
their effect on the development of cotton production in Ghana. It is based on a practical
management problem identified by the researcher during the study.
Data were based on the analysis of cotton out-growers performances over the last ten (10) years
gathered from the Monitoring and Evaluation Unit, the Accounts department, Credit and
Supplies Unit, Production department, and the Internal Audit Unit. The results were also based
on questionnaire administered to the management, Cotton Production Assistants, and cotton out-
growers to obtain primary data. The data was analyzed and synthesized from both the primary
and secondary sources. Suggested strategies, the implementation of which would ensure the
effective management of inputs loans and improve liquidity, profitability and the reduction in
bad debts management are made at the end of the study.
The production of cotton in Ghana is operated using the out grower's system where farmers are
pre-financed with inputs mainly fertilizers, insecticides and land preparation. The farmers supply
land and labour and beyond this, bear no other economic risk or responsibility. The farmers are
required to produce seed cotton for sale to the cotton companies in order to payoff the credit
granted. The performances of the farmers over the past ten (10) years have become very poor
leading to many farmers' inability to pay back the loans.The management of the credit scheme has been the concern of management of the various
players in the cotton industry. Theoretical and conceptual considerations have been reviewed on
existing literature by seasoned academicians and professionals in the field of loan management.
The basic understanding of the concepts and findings were vital for grasping the problem at hand
and suggesting ways to solve the problem. Results from the management revealed that 100% of
them are of the view that the company cannot operate without pre-financing the out-growers.
This reveals how important the input loan scheme is to the entire operations of the company.
Continuous financing of defaulting farmers is the fact that GCCL does not have a data-base of all
the farmers in the out-grower scheme. Developing of a data base of out-growers will enable the
company to assess the performance of each farmer on the scheme in terms of production and
repayment track records. GCCL need to transfer the of Risk of Cotton Production to Out-
Growers by adopting the group farming system and also facilitate the granting of loans to farmer
groups from banks with the groups taking full responsibility for repayment of the loan and the
company acting only as guarantors or witnesses. GCCL also need to set production target for
out-growers, and out-growers who are able to meet such targets should be publicly rewarded.
Cotton Production Assistants (CPAs) must be given performance targets and those whose
farmers are able to produce enough to pay back their input loans should be handsomely rewarded
financially or through promotion. GCCL should create a credit department headed by a Credit
Officer and also develop the Capacity of CP As on credit supervision.